Real Property 2
ACCEPTANCE OF DEED
Acceptance of deed by grantee is presumed unless the facts show otherwise. (Only way a grantee cannot accept is to reject.)
TERMINATION OF EASEMENTS
An easement can always terminate by its own terms in the agreement. However, there are six possible situations where an easement ends for reasons outside the terms of the easement: Unity of Ownership or Merger Whenever both dominant and servient estates come together in the same owner, the easement is terminated. Once an easement is terminated through unity of ownership, it is dead and never revives. Release A valid release that complies with the Statute of Frauds and all deed formalities terminates an easement. E.g. Sansa had the easement to go to the beach over Margaery's lot. Sansa then called Margaery up and orally released her easement. Is the easement terminated? No; does not meet SoF Abandonment The intent to abandon must be manifested by taking some physical act on the property itself that would show the intent to abandon. E.g. Arya had the easement to go to the beach over Brienne's lot. Arya called up Brienne and "released" the easement, saying she would never use the easement again. Thirty years went by, and the easement was never used. Has the easement been abandoned? No b/c no physical act mere nonuse, no matter how long it lasts, is not abandonment Termination by Estoppel Two elements for termination by estoppel: • There must be a representation of relinquishment by the holder of the dominant estate; and • Change of position in reliance by the holder of the servient estate. E.g. Arya had the easement to go to the beach over Brienne's lot. Arya called up Brienne and "released" the easement, saying she would never use the easement again. Brienne decided to put a swimming pool on her lot and located it where Arya had walked to get to the beach. Is the easement terminated? Yes. Termination by Prescription Owner of servient estate must stop the use of the easement and keep it stopped for the statutory period. End of Necessity Once the necessity that created an easement by necessity ceases to exist, so does the easement. E.g. Gregor had an implied easement by necessity across land that had been sold to Oberyn, because there was no other way off Gregor's property. Some years later, the state put in a new four-lane highway along the rear of Gregor's land. Is the easement extinguished? Yes.
Defenses—Changed Circumstances
Because this is an action in equity, all of the usual equitable defenses are available—unclean hands, laches, and estoppel. The most important defense to enforcement of an equitable servitude on the bar exam, however, is changed circumstances. HYPO 11I A residential subdivision was surrounded by industrial development. Each lot in the subdivision was restricted to residential use only. The houses along the border are so affected by the pollution from the adjacent industry that they are unfit for residential use. Can an owner of one of the houses on the border void the residential use only restrictions by virtue of the changed conditions? No. *Only works if all of the lots in the subdivision are affected*
Disability and Limitations Tolling
Being a minor, being of unsound mind, or being in jail are considered legal disabilities that require tolling of the limitations statute. However, the tolling is limited. If the owner is under a disability *at the time* the adverse possession begins, the adverse possession clock does not start to run until the owner is free of that preexisting disability. But, if the disability arises *after* the adverse possession begins, it's an intervening disability, and it is ignored. No tacking of disabilities.
Vertical Privity
Vertical privity refers to those who subsequently acquire property subject to the covenant (the successor in interest) and the original party from whom they got the property. *There must be a transfer of the original covenantor's entire estate to the successor.*
EQUITABLE SERVITUDES
When the plaintiff wants damages for the defendant's violation of a covenant, then we look to the requirements for enforcement of a covenant at law. Now we're going to learn the law that applies when the plaintiff wants specific performance or, more commonly, an injunction for violation of a promise concerning the use of land. The equitable servitude is a promise that equity will enforce through injunctive relief. Creation There are four requirements for the creation of an equitable servitude: • Writing • Intent • Touch and Concern • Notice Note! Privity is not required to enforce an equitable servitude.
LEGAL EFFECT OF CONTRACT OF SALE—EQUITABLE CONVERSION
Risk of Loss Under the doctrine of equitable conversion, once the contract is signed, equity treats the property as the buyer's land. Therefore, the buyer bears the risk of loss, even if the seller remains in possession and control. Note: This rule applies only if seller is not at fault. Death of a Party Before Closing Equitable conversion preserves rights as set in the contract, and death of a party before closing does not affect them. If a seller dies before closing, the buyer closes with the seller's estate. The seller's interest is personal property. If the buyer dies before closing, the seller closes with the buyer's estate. The buyer's interest is real property
ADVERSE POSSESSION REQUIRED ELEMENTS TO ACHIEVE ADVERSE POSSESSION
Six Elements: "HELUVA" All 6 elements must be present in order to acquire title by adverse possession. If any are missing then X is just a trespasser. • Hostile—Being on the property with no right to be there. • Exclusive—Excluding others from possessing the property. • Lasting—Possession lasting for the statutory period. • Uninterrupted—Continuing, uninterrupted use an ordinary owner would make. • Visible—Out in the open ("open and notorious"). • Actual—Must actually possess the land to get title (with two exceptions: constructive adverse possession and leasing of land not owned). Two things that are not required: • True owner does not have to know a trespasser is on land. • Possessor does not have to think that he owns the property. It is OK to be a trespasser and know it. No need for a claim of right by adverse possessor.
Subdivisions (General or Common Scheme Doctrine)
Suppose A subdivides her land into 50 lots. She sells lots 1 through 45 through deeds that contain covenants restricting use to residential purposes. A then sells one of the remaining lots to a commercial entity, B, by deed containing no such covenant. B now seeks to build a convenience store on his lot. Can B be enjoined from doing so? Yes if the elements of general or common scheme apply Requirements There are two elements of this doctrine: • Intent to create a servitude on all the land in the subdivision. This is found in the common building plan. The plan may be found in a subdivision map or by deeds from a common grantor with restrictions. If established, the benefit of the restriction attaches to all owners in the subdivision. • The defendant-owner must have notice of the promise. Notice can be established three ways: Actual notice; Record notice (where the restriction is in the direct chain of title); or Inquiry notice (meaning that owner is held to know anything that a reasonable investigation might have revealed).
WATER RIGHTS
1. Rights to Watercourses There are two systems for determining rights to water in streams, rivers, and lakes. Riparian Rights Under a riparian rights system, the owners of land have rights to a reasonable amount of water bordering their land. They are riparian owners. Riparian owners are liable only where they unreasonably interfere with another's use of the water. Prior Appropriation Doctrine Under a prior appropriation system, rights are allocated based upon a first in time-first in right rule. The first person who diverts and uses water from a watercourse has the right. Any beneficial use of the water (for example, for agricultural use) will create the appropriation right. 2. Groundwater Groundwater is water beneath the surface of the earth that is not confined to a known channel. The owner of the land above the groundwater (the "surface owner") has a right to reasonable use of groundwater. The surface owner's use may not be wasteful. 3. Surface Water Surface water comes from rain, springs or melting snow. It is water that has not reached a watercourse or basin. Under the *common enemy* rule, a landowner may make changes on her land to combat the flow of surface water. But note! Many courts have modified the common enemy rule to prohibit harm to another's land.
BONA FIDE PURCHASER
A bona fide purchaser is one who: purchases Blackacre for value and without notice that someone else got there first. Value Two routine value questions: • The bargain basement sale: HYPO 15A B paid $50,000 cash for Blackacre, when its fair market value is estimated at $100,000. Is B a purchaser for value? Yes if B remits substantial pecuniary consideration. • The case of the doomed donee: recording statutes do not protect donees, heirs, or devisees. HYPO 15B B is O's heir, or devisee, or donee. In a recording statute question, what happens to B? B loses subject to the shelter rule. Notice The three forms of notice that a buyer may potentially be charged with are: Actual Notice What does actual notice mean? Prior to closing, B gets literal knowledge of A's existence Inquiry Notice Whether she examines the property or not, B is on inquiry notice of what? Whatever an examination of the land would reveal. The buyer of real estate has a duty to inspect the premises before transfer of title, to see, for example, whether anyone else is in possession. Thus, in our model, if A had taken possession, B would be on inquiry notice of that fact, thereby defeating B's status as a bona fide purchaser. If a recorded instrument makes reference to an unrecorded transaction, does the grantor put grantee on notice of anything? Grantee is on inquiry notice of whatever a a reasonable follow up would have revealed Constructive Notice B is on constructive notice (also known as "record notice") of A's deed if at the time B takes, A's deed was *properly recorded within the chain of title*. In our model, what if A has not recorded, or has not recorded properly at the time B takes? It depends on what recording statute applies. Assume that B is a bona fide purchaser. Does B win? Yes, if they win the race to record, unless notice jur.
RESTRICTIVE COVENANTS
A covenant is a contractual promise regarding land. Covenants can be affirmative (requiring the landowner to do something) or negative (restricting what the landowner can do with the land). We are going to focus on the negative, restrictive covenants. Covenant vs. Equitable Servitude On the bar exam, the same set of facts could seem to give rise to either a covenant or an equitable servitude. How will you know which analysis to apply? By the remedy sought. • If plaintiff wants money damages, the promise will be analyzed as a covenant at law. • If plaintiff wants an injunction to enforce the restriction, it will be analyzed as an equitable servitude.
DEEDS
A deed is the document that transfers legal title. The document must comply with the Statute of Frauds as well as have a proper execution, delivery, and acceptance. Once the deed is executed, delivered, and accepted, the contract merges into deed and is destroyed, and all contract provisions (e.g., implied warranty of marketable title) are lost unless included in deed (or contract specifies that they survive).
PROFITS
A profit gives the right to go onto land and take a natural resource away (e.g., timber, coal, etc.). Along with a profit goes an implied easement to go on the land to get the resource and take it away. Note: The same easement rules apply to any other questions that may be raised regarding profits.
LICENSES
A license is a limited privilege of use, and *not* a property interest; it is *only a contract right*, and it is *revocable at the will* of the licensor. A licensor may have to pay contract damages for wrongful revocation, but there are no property rights. Two situations to watch for on the exam: Tickets Tickets are always licenses. A license can be revoked, but contract damages may be imposed. E.g. You are visiting Detroit and go to Ford Field to see a Lions game. You purchase a ticket and go in. No sooner had you sat down when a member of the Ford family shows up and has you thrown out. Can you sue on your ticket to force your way in, claiming a property right? No. A license can always be revoked (i.e., ticket holder cannot force way on property), but contract damages may be imposed. Irrevocable License If the licensee has invested substantial money or labor or both in reasonable reliance on the license's continuation, then the license becomes irrevocable and can be enforced under principles of estoppel. Here are two important rules for the exam: • Any time an easement is attempted but fails due to the Statute of Frauds, there is a license. • However, if *money is spent on the property* in furtherance of that oral license, the license becomes irrevocable and is *just as good as an easement* and can be enforced under principles of estoppel. Irrevocable licenses are also called easements by estoppel.
CONTRACT OF SALE
A real estate contract is governed by all regular contract rules, plus: STATUTE OF FRAUDS Any contract of sale of an interest in real property must be in writing and signed by the one who is sued (aka, "the one who is charged"). The writing must contain the essential terms which include: • a description of the property; • the names of the parties; and • the price or a means of determining the price (such as "the FMV as determined by the appraisal"). The Doctrine of Part Performance The doctrine of part performance is the one exception to the Statute of Frauds that would support an action for specific performance. Most states only require two of the following: • Possession of the land by the purchaser, • Paying all or part of the purchase price, • Erecting improvements.
FORMALITIES OF A DEED
A valid deed must: • Be in writing • Identify the grantor and grantee Because a deed must identify the grantee, a deed to a dead person is invalid, although enforcement of the contract of sale can still be had by either the seller or the buyer's estate, and a new deed is made to the buyer's estate. • Contain the property description of the land. To have a sufficient property description, the description of the land need not be very specific but must provide the means to identify the property, that is, it must provide a good "lead." If you cannot identify the property being transferred, the deed is void for vagueness, and nothing gets transferred. • Include conveyancing language • Be signed by the grantor No consideration is needed for a valid deed. A land description by metes and bounds always controls over a description by acreage, or any other description, contained in a deed.
INSTALLMENT LAND CONTRACTS
An installment land contract may provide for forfeiture rather than foreclosure. In other words, look for a forfeiture clause that says if the debtor misses a payment, the seller can cancel the contract, keep all the money paid to date, and get the property back. These clauses can be enforced, but courts try to avoid this harsh result. Some states, for example, treat installment contracts like mortgages for purposes of the available remedies. Other states allow the purchaser to pay off the accelerated full balance of the contract and keep the land. This is similar to the equity of redemption for mortgages.
Requirements for Enforcement of Equitable Servitudes By and Against Successors
Burden For the burden of an equitable servitude to be enforceable against a successor promisor: • There must be intent that it run with the land; • There must be notice of the covenant (actual, record, or inquiry) at the time an interest in the burdened land is acquired; and • The covenant must touch and concern the land, i.e., it must make the land more valuable or more useful and must not be a personal promise. It must affect the relationship of the parties as landowners. Benefit For the benefit of an equitable servitude to run to a successor promisee there must be: • Intent that it run with the land. • The covenant must touch and concern the land. No privity or notice requirements! HYPO 11G Petyr and Ramsay lived next door to one another. In 1990, Petyr insisted that a fence be built between their lots, and he said that he would pay for the building of the fence if Ramsay would pledge that he and his heirs would maintain it. Ramsay agreed. They went to a lawyer and an agreement was signed and recorded. Later on, Ramsay sold his property to Varys. Although no enforcement at law because no horizontal privity, can Petyr enforce in equity and get an injunction against Varys forcing Varys to fix the fence? Yes b/c no privity in equity.
Remedies of Buyer If Seller's Title Is Unmarketable
Buyer must notify seller and give seller reasonable time to cure the defect, even if that postpones closing. If problem is not corrected, buyer has three options as remedies: • Rescission, which allows buyer to walk away. • Suit for damages for the breach. • Specific performance, which gives the buyer the option to take what seller can give but the price gets lowered to cover defect. Note: If buyer goes to closing and accepts deed without problems being cured, then due to the doctrine of merger, there is no recourse against the seller based on the contract. Any action taken from that point must then be based on what is in the deed the buyer receives.
THE RECORDING SYSTEM
Our model: The case of the double dealer. O conveys Blackacre to A. Later, O conveys Blackacre, the same parcel, to B. O, our double dealer, has skipped town. In the battle of A vs. B, who wins? Remember two brightline rules: • If B is a bona fide purchaser, and we are in a notice jurisdiction, B wins, regardless of whether or not she records before A does. • If B is a bona fide purchaser and we are in a race-notice jurisdiction, B wins if she records properly before A does. Who do the recording acts protect? Bona fide purchasers and mortgagees
Adverse Possession Against Concurrent Owners
Can occur only when the possessor excludes the other co-tenant(s) from possession and the statute runs. Exclusion starts the clock running; not the mere absence of the other party.
Tacking of Time for Owners and Possessors
Can tack periods of adverse possession, but the periods must pass directly from one adverse possessor to another, no gaps. Can also tack periods of true owners, meaning that the adverse possession does not have to be against the present owner for the entire statutory period.
MORTGAGES
Definitions A mortgage is the conveyance of a security interest in land, intended by the parties to be collateral for the repayment of the monetary obligation. It is a union of two elements: • Debt • The voluntary transfer of a security interest in the debtor's land to secure the debt. A mortgage is given by the debtor (mortgagor) to the creditor (mortgagee). If the loan is not paid in full, the sheriff sells the land at a court ordered foreclosure sale. Under the majority rule, unless and until foreclosure, the debtor (mortgagor) has title and the right to possession. The creditor (mortgagee) has a lien. An equitable mortgage arises with an absolute deed and a separate promise of reconveyance. O owns Blackacre. A lends O a sum of money. Both O and A understand that Blackacre is collateral for the debt. O, however, hands a deed to A that is absolute on its face. There's no mention of the word "mortgage" anywhere in the deed. What does this create? An equitable mortgage.
DELIVERY OF DEED
Delivery of deed does not always mean physical transfer. Legal test is solely a question of intent to pass title. E.g. Grantor started to hand a deed of gift to a child. Child said, "No, Mom, it's going to be safer with you." Child never touched the deed. If facts show the grantor's intent to pass title, the mere safeguarding of the paper by grantor does not show lack of delivery. However, if grantor dies and still has the deed in grantor's possession, there is a presumption of no delivery (can be rebutted by grantee). E.g. O intends to convey Blackacre to A, her daughter. O starts to hand the deed to A, who stops her and says, "Mom, I love you, but I cannot accept such a lavish gift." Has there been a delivery? No b/c express rejection Recording a deed raises the presumption of delivery, even if grantee never sees the deed and knows nothing about it. Once delivery occurs, title passes, and later returning deed to grantor or tearing up deed has no effect. In showing intent of grantor regarding delivery, can use any parol evidence—statements, conduct, anything.
Transferring the Burden of the Easement
Easements are always binding on subsequent holders of servient estates, even if the easement is not in their deeds, *providing the subsequent holder had notice of the easement* E.g. Arya granted an easement across Blackacre to Brienne, but the easement was not recorded. Brienne wanted the easement to use for a road to provide access to a public highway from a lot she owned behind Blackacre. Brienne was too busy at the time and made no effort to use her easement. Later, Arya sold Blackacre to Hodor, and neither told Hodor of Brienne's unrecorded easement nor included it in her deed to Hodor. Hodor had no independent knowledge of any easement across Blackacre. If Brienne now wants to put the road in over Blackacre, can she do so? No.
EASEMENTS types
Estates = Possession Easements = Use. An easement is a nonpossessory interest in land involving a right of use. Two types: • Easement appurtenant—When the easement directly benefits the use and enjoyment of a specific piece of land. E.g. Arya owned lot A fronting on the beach. Brienne owned lot B, directly behind lot A. Brienne bought an easement from Arya that would allow her to walk across her lot to get to the beach. Brienne's easement is appurtenant. There are always two pieces of property with an easement appurtenant: the burdened property or "servient estate" and the benefited property or "dominant estate." Brienne's lot is the dominant estate; Arya's lot is the servient estate. • Easement in gross—The easement does not benefit land. There is only a servient estate, no dominant estate. Classic examples are utility easements (e.g., power lines, railroad tracks).
MARKETABLE TITLE
Every land sale contract contains an implied warranty that at closing, seller will give buyer a marketable title—not necessarily perfect title, just one that a reasonable person would accept. To provide marketable title, the seller must provide buyer with three things: • Proof of title—give buyer some tangible evidence of title. • Title free of encumbrances. • Valid legal title as of the date of closing. What "Defects" Make Title Unmarketable? Defects in the Record Chain of Title These defects include variations in the property description, an improperly executed deed, or evidence that a prior grantor lacked capacity to convey the property. The Presence of Encumbrances No easements, no restrictive covenants, no mortgages, no options, etc., that are not mentioned in the contract for the buyer to take subject to. Notes: The presence of zoning ordinances does not make title unmarketable. However, a violation of a zoning ordinance will make title unmarketable. But, when comparing the violation of zoning ordinances to a violation of housing or building codes, the result is different. The violation of a housing or building code generally does not cause title to be unmarketable. A mortgage on the property is not an encumbrance that will impact marketable title if the mortgage is to be paid out of the proceeds of the sale. Title Acquired by Adverse Possession Title acquired by adverse possession is not marketable. However, the defect may be cured with a judgment of title in the seller or with a quitclaim deed from the party against whom the adverse possession occurred. When must the seller provide marketable title? The seller must be able to deliver a valid legal title on the day of closing. Watch for these sneaky facts on your exam. Remember that where a buyer finds at any time before closing that the seller does not have legal title, the buyer cannot rescind because seller only needs to provide valid legal title the day of closing.
CREATION OF EASEMENTS
Express Easements An easement is an interest in land and therefore must comply with Statute of Frauds and formalities of a deed. Unless for less than a year. Easements may be created by an *express grant* of an easement to someone else, or the *reservation* of an easement when land is sold to another. Implied Easements Implied Easement by Prior Use The implied easement by prior use is recognized because we assume that the parties intended the prior use to continue but did not reduce it to writing. An implied easement by prior use exists if: (1) commonly owned land is severed (becoming a dominant and servient estate); (2) during the time of common ownership there was a use by the common owner (i.e., someone who sells off a piece of his property to someone else), and the previous use is apparent and continuous (discoverable, not necessarily visible); and (3) its use is reasonably necessary for the continued enjoyment of the now dominant estate. Implied Easement by Necessity An implied easement by necessity exists when property is landlocked. This easement is recognized because it is presumed that individuals do not intend to own land that they cannot legally access. To create the easement: (1) there must have been common ownership of the land that was severed (now have dominant and servient estates); and (2) at the time of severance the dominant estate became landlocked and there is a strict necessity for access to a public road. Implied easement by necessity exists even if requirements of previous use are not satisfied; this easement merely addresses a need for access when severance occurs. The owner of the servient estate can choose the location of the easement so long as the location is a reasonable one. Easements by Prescription Arises like title by adverse possession but is only use, not possession. To create an easement by prescription: There must be actual use of the land of another and that use must be: • Open and notorious so that the landowner could discover the use; cannot be hidden or not discoverable. • Adverse or without the permission of the owner. Any grant of permission by the owner, even oral, will destroy the hostility, and there can be no easement by prescription. • Continuous and uninterrupted. Seasonal use can be OK if appropriate under the circumstances. All of these elements must be met for the prescriptive period. The time period for a prescriptive easement on the MBE is 20 years unless they give another period in the problem.
SCOPE OF EASEMENTS
Express Easements The terms of the easement control on questions of use. Easements Created Without a Writing If an easement is created without an express agreement, then the use or necessity that established the easement will define its use once created. Easement Is Silent If an easement is silent or was created without a writing, there are two presumptions: • It is presumed that the easement is perpetual (lasts forever unless otherwise stated). • The use presumed is that of *reasonable development of the dominant estate* (the kind of use that would have been reasonably contemplated by the parties when the easement was created). An easement can be used to benefit only the dominant estate, not other property. Use to benefit other property is excessive use; remedy is to enjoin that use (not terminate easement).
COVENANTS FOR TITLE
For purposes of the exam, we are going to consider the two primary types of deeds: • Quitclaim deed • General warranty deed To understand the distinctions, we need to understand covenants of title. If the grantor makes any promises regarding title, these are called covenants for title. *Quitclaim Deed* The grantor makes no promises regarding title with a quitclaim deed. In other words, the quitclaim deed contains no covenants. Note! The grantor isn't even promising that she has title to convey. *General Warranty Deed* The general warranty deed protects the buyer by warranting against all defects of title, *including those attributable to the grantor's predecessors*. A general warranty deed contains the six traditional covenants of title. *Present Covenants* There are three present covenants. The buyer can sue on a present covenant immediately because a present covenant is breached, if at all, at the moment the conveyance is made. • The covenant of seisin warrants that the grantor owns the estate she claims to convey. • The covenant of right to convey promises that the grantor has the power to convey the property. • The covenant against encumbrances promises that there are no servitudes or mortgages on the land, other than those that have been previously disclosed to the buyer. *Future Covenants* A future covenant is not breached until the grantee is disturbed in possession. The statute of limitations for breach of a future covenant will not begin to run until that occurs. Because a future covenant is breached only in the future, it runs with the land and can be enforced by all subsequent purchasers. • The covenant of quiet enjoyment promises that the grantee will not be disturbed in possession by a third party's lawful claim of title. • The covenant of warranty promises that the grantor will defend the grantee should there be any superior claims of title asserted by others. • The covenant for further assurances (the "mop up" covenant) promises that the grantor will perform whatever future acts are reasonably necessary to perfect the grantee's title if it later turns out to be imperfect. If the seller did not do something required to pass valid title, the seller promises to do what is necessary to pass title to the buyer. *Damages* If the covenant against encumbrances is breached, the damages are (1) the cost of removing the encumbrance from the land, or (2) the diminished fair market value if the encumbrance cannot be removed. If the other covenants are breached, damages are generally limited to purchase price received by warrantor, plus incidental damages. Don't fall for answer that would give plaintiff full recovery. HYPO 14F Stannis conveyed the farm to Yara with a general warranty deed, and the purchase price was $5,000. Later on, Yara conveyed the farm to Theon with no warranty, and here the purchase price was $10,000. Then still later, Theon was ousted by the true owner, Walder. Can Theon sue Yara, from whom he bought the property? No. No warrantee. Can Theon sue Stannis, who gave the warranty in his deed to Yara? Yes. Warrantee. What are the damages? $5k
Establishing the Benefit of a Real Covenant
For the benefit of a real covenant to run to a successor promisee: • There must be intent that it run with the land; • The covenant must touch and concern the land. • There must be vertical privity between the party who subsequently acquires property subject to the covenant (the successor in interest) and the original party from whom they got the property. NO NEED FOR VERTICAL PRIVITY Unlike the vertical privity requirement for the burden to run, for the benefit to run, the owner of any succeeding possessory estate can enforce the covenant—they *do not have to succeed to the entire estate*. What if both plaintiff and defendant are successors in interest? Petyr, the promisee, has the benefited land. Tyrion is the successor promisee. Ramsay is the promisor, and Varys is the successor promisor. HYPO 11F Petyr and Ramsay lived next door to one another. In 1990, Petyr insisted that a fence be built between their lots, and he said that he would pay for the building of the fence if Ramsay would pledge that he and his heirs would maintain it. Ramsay agreed. They went to a lawyer and an agreement was signed and recorded. Later on, Ramsay sold his property to Varys. A few years later, Petyr sold his property to Tyrion. Can Tyrion enforce the restriction at law and get damages against Varys? No b/c no horizontal privity (b/c did not convey to a strawman), so burden does not run. Still may be able to get injunctive relief via equitable servitude E.g. HYPO 11E Petyr and Ramsay agreed on the covenant. Petyr gave Tyrion a life estate in the property and retained a reversion. Is there vertical privity so as to allow Tyrion to receive the benefit of the covenant at law? Yes
Foreclosure Eliminates Junior Interests
Foreclosure eliminates all junior interests (those interests that came later), but does not eliminate senior interests (those interests that came earlier in time). Senior interests continue in place; the buyer will take the property subject to the senior interest. E.g. O mortgages Blackacre to the First Bank. Later she takes out a second mortgage with the Second Bank. O wants to build a new barn, and so she obtains money from the Third Bank, which takes out a third mortgage on the property. Then O wants to build a new shed. So, she obtains money from the Fourth Bank, which takes out a fourth mortgage. O's not done yet. She takes out another loan from the Fifth Bank, secured by a fifth mortgage. O can't make payments on all five mortgages. O pays the First Bank, the Second Bank, and the Fifth Bank. But she doesn't pay the Third Bank or the Fourth Bank. The Third Bank sues to foreclose. When the third mortgage is foreclosed, what happens to the other mortgages? 4-5 are extinguished. 1st and 2nd continue in place. Buyer at mortgage sale will take property subject to the 1st and 2nd mortgage. Holders of junior interests have the right to pay off any mortgage being foreclosed on in order to keep their junior interests from being eliminated. Thus, junior interests are a *necessary party* to any foreclosure proceeding. If they are not made a party to any foreclosure, then their junior interests are not eliminated by the foreclosure.
Horizontal Privity
Horizontal privity always refers to the original parties to the covenant. This element requires that at the time the promisor entered into the covenant with the promisee, the two landowners shared some interest in the land independent of the covenant. If no privity, If they both convey their lots to the strawman, they can have the strawman convey the lots back with the covenant.
ESTOPPEL BY DEED
If A deeds property to B that A does not own, and A later does acquire title, then B will get title because grantor gave an implied covenant that title would be transferred to grantee. But, if grantor transfers to a BFP (bona fide purchaser) after getting title, then the original grantee loses and cannot rely on estoppel by deed. HYPO 14G Balon conveyed an island to Theon, but Balon did not own the island at the time. Some five months after the purported date to transfer title to Theon, Roose, the real owner of the island, conveyed title to Balon. What is the effect on Theon of the transfer of title of the island to Balon by the true owner Roose? There is an implied covenant that title goes to theon b/c of estoppel by deed. Shortly after Balon got title from Roose, Balon conveyed to Yara, a bona fide purchaser who had no knowledge of the earlier claim of Theon. Now who owns the island, Balon, Roose, Theon, or Yara? Yara.
Transferring the Benefit of the Easement
If the easement is appurtenant (it runs with the land), the benefit automatically goes along with the dominant estate, whether or not it is mentioned in the conveyance. It cannot be transferred separately from the dominant estate. E.g. Jaime gave an easement over his property to Brienne for the benefit of her neighboring land, and the easement was properly recorded. Brienne later sold her lot to Catelyn and did not mention the easement in the deed. Can Catelyn use the easement? Yes. If the easement is in gross, then benefits of easements in gross that are commercial can always be transferred, but benefits of easements in gross that are personal cannot be transferred.
COVENANTS RUNNING WITH THE LAND AT LAW
In the law of covenants, we say that one estate is the burdened estate and the other estate is the benefited estate. The burdened estate is the land that bears the burden of the promise. The benefited estate, by contrast, is the land that enjoys the benefit of the performance of the promise. (That means its use and enjoyment is benefited and/or its market value increased by the covenant.) If certain requirements are met, covenants are capable of binding the successors of the original parties—they will run with the land. Establishing the Burden of a Real Covenant For the burden of a real covenant to be enforceable against a successor promisor (person who buys the land) there must be: • Intent that it run with the land; • Notice of the covenant (actual, record or inquiry) at the time an interest in the burdened land is acquired; and • The covenant must *touch and concern the land*, i.e., it must make the land more valuable or more useful. It must not be a personal promise; it must affect the relationship of the parties as landowners. *For the burden to run against a successor in interest*, there must be *both horizontal and vertical privity*. Without all of the elements being established, the burden does not run, and thus, there can be no enforcement of the restriction at law (for damages) against the successor in interest.
LATERAL AND SUBJACENT SUPPORT
Lateral Support A landowner has a right to support from the sides, known as a right to lateral support. Cases involving lateral support arise when an adjacent landowner engages in excavation on her land and the adjoining land caves in. An adjacent landowner whose excavations cause land and the buildings on it to collapse is strictly liable if the plaintiff can show that the improvements on the plaintiff's land (for example, the buildings) did not contribute to the land's collapse. In other words, for strict liability to attach the plaintiff must show that her land would have collapsed from the excavations even in its unadorned state (i.e. without the house). If the improvements on the plaintiff's land contributed to her land's collapse, then the adjacent landowner will be liable only if her excavation was negligent. E.g. P's land is next to D's land. P has built a home on his land. D excavates her land right up to P's property line. Even though D uses due care, P's land and home collapsed into the excavation. Is D strictly liable for the damage to P's home? Yes, but only if P's land would have collapsed w/o the weight of the house on it Subjacent Support Typically, the landowner has the property rights to the land at the surface of the earth and to the minerals beneath the land. But a landowner may sell the mineral rights beneath the land to someone else. Problems involving rights of subjacent support arise when the mineral rights have been legally severed from surface rights. What happens when the owner of the mineral rights removes the minerals and the surface of the land subsides or collapses? Surface owners have the right to have their land supported from the bottom. This right extends to the land and any improvements that existed as of the date that the mineral rights were severed from the surface rights.
Leasing Land to Someone Else
Leasing land to someone else qualifies as possession for adverse possession purposes.
THE RECORDING STATUTES
The Notice Statute "A conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, unless the conveyance is recorded." If, at the time B takes, he is a bona fide purchaser, he wins. It won't matter that A may ultimately record first, before B does. It won't matter, in the A vs. B contest, that B never records. B NEVER has to record The Race-Notice Statute "Any conveyance of an interest in land shall not be valid against any subsequent purchaser for value, without notice thereof, whose conveyance is first recorded." What must B do to prevail? Be a bpf, win the race to record Race Statute "A conveyance of an estate in land shall not be valid against a subsequent purchaser for value unless the conveyance is first recorded." Notice does not matter. The first to record wins.
Future Interest Situations
The clock does not run against the holder of the future interest until the interest becomes possessory. It is important to identify what existed at the time the adverse possession time clock actually started. B/c that is what interest you gain even if the prop is later passed to new owners. e.g. Ned conveyed the estate to Robb for life, remainder to Sansa. Then Theon came on the unoccupied land and began a period of adverse possession. Theon satisfied all six requirements of adverse possession. What has Theon acquired by adverse possession? Rob's life estate pour autre vie. Can Theon get the rest of the fee simple (i.e., Sansa's remainder)? Yes, but the 6 reqs must be satisfied against Sansa and the clock does not start to run against her after Rob dies. e.g. Theon enters onto land that Catelyn owns in fee simple. He begins satisfying all six requirements of adverse possession. Five years later, Catelyn conveys the farm to Robb for life, remainder to Sansa. When Theon completes the statutory period, what estate has Theon acquired by adverse possession? Fee simple absolute b/c clock started before conveyance. HYPO 12G Stannis conveyed his mansion to his daughter Shireen, for so long as no liquor or tobacco is consumed on the premises. A few months later Stannis stopped by to see Shireen and to have a good wholesome chat over a glass of milk. He found Shireen hosting a party with 50 guests, each with a glass of vodka in one hand and a cigarette in the other. Stannis stormed home and seethed but did nothing. Shireen stays right where she is. Has the clock started for adverse possession? Yes; the clock started when the condition was broken. HYPO 12H Stannis conveyed his mansion to his daughter Shireen "provided, however, if liquor or tobacco is consumed on the premises I reserve the right to reenter and retake the property." Stannis stopped by and found the vodka/cigarette party in full sway. Has the clock started for adverse possession? *No because he hasn't acted to retake.*
PHYSICAL CONDITION OF THE PROPERTY AND SELLER'S LIABILITY
The general common law rule is that a sale of land does not come with any warranties of quality or fitness when it comes to the physical condition of the property. Originally sellers had no obligation to even disclose any defects. However, some modifications have been made. There are distinct differences between new construction and resale transactions. Liability of Seller of New Construction A majority of states now impliedly include a warranty of good workmanship and a warranty of habitability in the sale of a new home. These warranties basically provide that the builder is promising that the quality of construction meets a certain level and that the residence is suitable for human habitation. Note: These warranties only cover material latent defects. Liability of Seller of Existing Land and Buildings (Resale) The seller of existing land and buildings does not make any implied warranties regarding the physical condition of the property. However, the seller may have liability based on other theories. • Seller must disclose serious defects that the seller knows of and are not obvious to the buyer. • Seller can't actively conceal defects. • Seller cannot make a false statement regarding a condition of the property.
Priorities
The general rule is that where there are multiple mortgages on a single property, priority is allocated based on the common law rule of first in time, first in right. That common law rule of priority may be changed by the terms of the applicable recording statute. Subordination Agreements A senior mortgage may agree to subordinate to a junior mortgage—a mortgage that comes later in time. Changes in Senior Mortgages Generally, if the mortgagor does anything to increase a senior mortgage (for example, borrows more money or increases the interest rate), then that senior mortgage loses its priority over junior mortgages—but only to the extent of the change.
TIME OF PERFORMANCE
The general rule is: Even if there is a closing day specified in contract, time is not of the essence in land sale contracts, unless the contract says so or the facts make clear that is what the parties expected. If time is not of the essence, then performance must be tendered within a reasonable time after the date for closing set in the contract. (*2 months late is typically considered reasonable*.) BUT, *if the contract has a time of the essence clause, and it is violated, the party who failed to perform on the date can no longer enforce the contract.* Remedies Available for Breach of Sales Contract • Damages: The measure is difference between contract price and value of the land on the day of the breach. • Liquidated damages: The buyer's deposit can be forfeited as liquidated damages *so long as it is not more than 10% of sales price*. • Specific performance of a land sale contract is always available to both buyer and seller.
CONDITIONAL DELIVERY
The grantor hands over deed, but tries to condition delivery on some event. This may be a valid conditional delivery depending on the specific facts. *Condition Expressly Written into Deed* EXAMPLE The deed language is, "to A, but not until I die," and the deed is handed to the grantee. This is *a valid delivery of a future interest*. A: Vested Remainder in Fee Simple. O: Life Estate. If deed says it will not become effective until death of grantor, this is a valid delivery of a future interest. The deed is read as if it said "O to O for life, then to A" to give effect to the grantor's intent. However, if this is how the deed is written, it will at that time create a life estate and remainder that cannot be revoked. *Oral Condition with Delivery to Grantee* The deed language is, "Selwyn to Jaime," but in handing over the deed Selwyn tells Jaime that "of course this won't become effective unless you marry my daughter Brienne." Jaime has: FEE simple absolute. Selwyn has: nothing. *If the condition is made orally at the time of delivery of the deed, disregard the oral condition.* *Making Delivery Conditional on Payment of Purchase Price* This is valid provided grantor makes delivery to a third party in escrow with instructions to deliver to grantee when the condition is satisfied (and oral instructions are OK). Once the deed goes to the escrow agent, grantor cannot get deed back; as long as grantee satisfies the condition, grantee gets property no matter what subsequent change of mind grantor has.
REPAIR OF EASEMENTS
The holder of an easement must keep the easement in repair and can *always* go on the servient estate to repair the easement, even if the grant of the easement does not specifically provide the right to enter and repair. The holder of an easement must make *reasonable* restoration of the servient estate after repairs. The holder of an easement is obligated to make necessary repairs; the holder of the servient estate has no obligation of repair (unless easement says otherwise).
Transfer of Security Interests
The mortgage automatically follows a properly transferred note. All parties to a mortgage can transfer their interests. Transfer by Creditor-Mortgagee The creditor-mortgagee can transfer her interest by: • Endorsing the note and delivering it to the transferee, or • Executing a separate document of assignment. The general rule is that a mortgagee can freely transfer the note and the mortgage will always follow the note it secures. Transfer by Debtor-Mortgagor When the mortgagor transfers title to the property, the grantee automatically takes the property subject to the mortgage. However, the grantee will not be personally liable on the mortgage unless the grantee specifically assumes the mortgage. But note! The mortgage still has to be paid or the mortgagee will foreclose on the property. The grantee is subject to losing the property in a foreclosure sale. E.g. O mortgages Blackacre to the Bank. Sometime later, O sells Blackacre to A, "subject to the mortgage to the Bank." A agrees to assume the mortgage. Sometime later, A sells Blackacre to B, "subject to the mortgage to the Bank." B fails to pay the mortgage and the Bank forecloses. Blackacre is sold for less than the balance due on the mortgage. Who can the Bank sue for the deficiency? O b/c O signed the note. And A b/c A assumed the note. B will likely lose the property in foreclosure to the bank.
FORECLOSURE
The mortgagee may look to the land for satisfaction of the debt. To do so, the mortgagee must foreclose by a proper judicial proceeding. At foreclosure, the land is sold and the proceeds go to satisfying the debt. As we just saw, if the proceeds from the sale are less than the amount owed, the mortgagee can bring a personal action against the debtor for a deficiency judgment. Redemption Debtor's Right of Redemption—or the Equity of Redemption Up until the moment of the foreclosure sale—the debtor can redeem the property by paying the amount due—the amount in arrears (plus interest)—unless the mortgage includes an acceleration clause. If the mortgage includes an acceleration clause, the debtor must pay off the entire balance of the mortgage in order to redeem the property. The right of redemption cannot be waived in the original mortgage. It can be waived later if there is separate consideration for the waiver (i.e., as when borrower later loses his job and so lender agrees to extend maturity date of loan). An attempt to waive the right to redemption in the original mortgage is generally referred to as clogging the equity of redemption and is prohibited. Today, approximately half the states have a statutory right of redemption that allows the mortgagor (debtor) a statutory right to redeem the property for some fixed period of time after the foreclosure sale has occurred (typically six months to one year).
POSSESSOR'S RIGHTS
The possessor of land has the right to be free from trespass and nuisance. Trespass Trespass is the intentional and unprivileged invasion of the land of another. An invasion occurs when any physical object has entered the land. Nuisance We should distinguish a trespass from a nuisance. A private nuisance is the substantial and unreasonable interference with another's use and enjoyment of their land. Unlike trespass, nuisance does not require a physical invasion. Odors and noise can create a nuisance, but not a trespass. What happens if the plaintiff is unusually sensitive? They are not protected. E.g. A owns a horse ranch next to a factory. The factory emits a chemical that is odorless and harmless to humans but unfortunately causes some of A's horses to break out into rashes. A sues the owner of the factory for nuisance. Who wins? The factory owner
CHAIN OF TITLE
The sequence of recorded docs capable of giving record notice to subsequent takers. It is established through a title search of a grantor-grantee index. Note two discrete chain of title problems: The Shelter Rule One who takes from a BFP will prevail against any entity that the transferor-BFP would have prevailed against. In other words, the transferee "takes shelter" in the status of her transferor, and thereby "steps into the shoes" of the BFP even though she otherwise fails to meet the requirements of BFP status. E.g. O conveys to A, who does not record. Later, O conveys to B, a BFP, who records. B then conveys to C, who is a mere donee or who has actual knowledge of the O to A transfer. In the contest of A vs. C, who prevails? C b/c shelter - in both notice and race notice state The Problem of the Wild Deed O sells Blackacre to A, who does not record. Then, A sells to B. B records the A-to-B deed. Is the A-to-B deed connected to the chain of title? No b/c it contains a missing grantor - the O-A link. The A-to-B deed, therefore, is a wild deed. The rule of the wild deed: If a deed, entered on the records (A to B), has a grantor unconnected to the chain of title (O to A), the deed is a wild deed. It is *incapable* of giving record notice of its existence. O, our initial grantor and double dealer, then sells Blackacre to C. Assume that C has no actual or inquiry knowledge of the O-to-A or A-to-B conveyance. C records. O has skipped town. In the contest of B vs. C, who prevails? C in both notice and race notice b/c BFP and in race notice also won the race to record
Defenses to foreclosures
There are consumer protection defenses to foreclosure. For example, the Dodd-Frank Act requires residential mortgage lenders to determine a mortgagor's ability to repay before making the loan. A violation of the Act can be used by the mortgagor as a defense in the foreclosure action. During the foreclosure process, the mortgagee must in good faith consider a request made by the mortgagor for a loan modification as an alternative to foreclosure. The mortgagee cannot file a foreclosure action while such a request is pending. If the request is made after the foreclosure action is filed, the mortgagee cannot proceed to the foreclosure sale until the request is resolved.
SPECIAL RULES FOR ADVERSE POSSESSION Constructive Adverse Possession
This is an exception to the requirement of actual possession. Samwell entered on property under a color of title to 100 acres, but actually possessed only 85 acres. The statutory period ran, and all the other requirements of adverse possession are satisfied. What has Samwell obtained? All 100 acres "Color of title" means a bad title; the possessor is not a naked trespasser but holds a claim of title that is no good. If someone goes on property under a color of title to a larger tract, but actually possesses only a part of the larger unit, constructive adverse possession can give title to the rest of the property. Two additional requirements: • The amount actually possessed must bear a reasonable relation to the whole (i.e., not be only a small part), and • The property must be unitary, that is, a seamless whole. (a road dividing it makes it not unitary)
ZONING AND EXACTIONS
Zoning is land use regulation. A government may control land use through regulations pursuant to its police powers. Types of Zoning Ordinances Cumulative Zoning The government may identify a hierarchy of uses of land, beginning with a single-family home as the highest use, followed by a two-family home, then an apartment building, then a mall, and then a factory. This is known as cumulative zoning. Under a cumulative zoning ordinance, land zoned for a particular use can be used for that use or any higher use. HYPO 17D O owns Blackacre. The city has zoned Blackacre for apartments. O wants, however, to build a two-family home on Blackacre. May O do so? Yes, if cumulative zoning Noncumulative Zoning Exam Tip Watch out for the distinction between cumulative and noncumulative zoning ordinances. Under a noncumulative zoning ordinance, land may be used only for the purpose for which it is zoned. Exactions A government may require a developer to obtain a building permit before building. If the government imposes conditions on the permit, those conditions must be *reasonably related*, in nature and scope, to the impact of the proposed development. If they are not reasonably related, then the conditions are unconstitutional exactions.